For the best part of the last decade, the UK economy has been defined by rising consumer borrowing, which has continued to drive growth while the private sector has recovered from the impact of the Great Recession.
However, the consumer credit boom may be coming to an end, with growth in loans and credit card debt having slowed to its weakest pace in more than three years.
Having fallen below 8%, consumer credit is also growing below its average price for the last 20 years, with banks and lenders clamping down on borrowing and rising interest rates deterring customers. The demand for alternative and specialist financial products continues to boom, however, but is this a fad or does it offer genuine value to customers?
The Value of a Diversified Financial Market
Interestingly, the rising demand for specialist financial products has increased as traditional lending has declined. Many experts believe that these two developments are connected, with niche and targeted loans offering greater accessibility to customers as banks continue to tighten their belts.
This highlights the underlying value of a diversified financial market, which offers flexibility to borrowers and enables them to seek out alternative lenders that view their application in a favourable light.
This taps into another primary benefit of diverse financial products, particularly those that are tailored to suit specific demographics. One lender that embodies this is Smart-pig, which is a short-term lender that has been established to provide an affordable line of credit to students.
Unlike most short-term lenders, Smart-pig does not charge late payment fees, while it also offers a 10-day grace period to allow for delays in the advancement of student finance.
With a 50% interest cap, the company also minimises the amount repayable by students, who typically have low levels of disposable income and no regular source of income.
This type of targeted loan package offers immense value to students, who can seek out a viable and transparent line of credit that has been designed to suit their unique circumstances. Most importantly, it tailors the cost of the loan to suit the applicants’ means, increasing the chances of a successful application and timely repayment in the process.
The Last Word
To some people, all financial products have been created equal, and so-called ‘alternative’ loans or credit cards represent little more than innovative marketing gimmicks.
This is far from the truth, however, as the diversification of the lending market has created a host of different products to suit variable demographics and customer needs.
In this respect, the development of different financial products is crucial to the future of the market, particularly in an age where traditional lenders are turning their back on customers.